Two co-conspiratorial criminals are arrested. When they are taken to the police station, they refuse to say anything and are put in separate interrogation rooms. Eventually, a police officer enters the room where Prisoner A is being held and says: “You know what? Your partner in the other room is confessing. So your partner is going to get a light prison sentence of just one year, and because you’re remaining silent, the judge is going to stick you with eight years in prison. Why don’t you get smart? If you confess, too, we’ll cut your jail time down to five years, and your partner will get five years, also.” Over in the next room, another police officer is giving exactly the same speech to Prisoner B. What the police officers do not say is that if both prisoners remain silent, the evidence against them is not especially strong, and the prisoners will end up with only two years in jail each.

The game theory situation facing the two prisoners is shown in
[link] . To understand the dilemma, first consider the choices from Prisoner A’s point of view. If A believes that B will confess, then A ought to confess, too, so as to not get stuck with the eight years in prison. But if A believes that B will not confess, then A will be tempted to act selfishly and confess, so as to serve only one year. The key point is that A has an incentive to confess regardless of what choice B makes! B faces the same set of choices, and thus will have an incentive to confess regardless of what choice A makes. Confess is considered the dominant strategy or the strategy an individual (or firm) will pursue regardless of the other individual’s (or firm’s) decision. The result is that if prisoners pursue their own self-interest, both are likely to confess, and end up doing a total of 10 years of jail time between them.

The prisoner’s dilemma problem

Prisoner B

Remain Silent (cooperate with other prisoner)

Confess (do not cooperate with other prisoner)

Prisoner A

Remain Silent (cooperate with other prisoner)

A gets 2 years, B gets 2 years

A gets 8 years, B gets 1 year

Confess (do not cooperate with other prisoner)

A gets 1 year, B gets 8 years

A gets 5 years B gets 5 years

The game is called a dilemma because if the two prisoners had cooperated by both remaining silent, they would only have had to serve a total of four years of jail time between them. If the two prisoners can work out some way of cooperating so that neither one will confess, they will both be better off than if they each follow their own individual self-interest, which in this case leads straight into longer jail terms.

The oligopoly version of the prisoner’s dilemma

The members of an oligopoly can face a prisoner’s dilemma, also. If each of the oligopolists cooperates in holding down output, then high monopoly profits are possible. Each oligopolist, however, must worry that while it is holding down output, other firms are taking advantage of the high price by raising output and earning higher profits.
[link] shows the prisoner’s dilemma for a two-firm oligopoly—known as a
duopoly . If Firms A and B both agree to hold down output, they are acting together as a monopoly and will each earn $1,000 in profits. However, both firms’ dominant strategy is to increase output, in which case each will earn $400 in profits.

the law of diminishing returns states that every additional increase in the variable factor of production, keeping other factors fixed, will eventually reach a point were returns will diminish with every successive unit of factor added.

Cyclical unemployment .it has to do with an increase in the quantity of good demanded or there is over production which result in fall in prices. Industries will be affected it will now causes retrenchment of workers in the industries while structural unemployment arises as a result of slight change

Adeoti

In the industrial structure of a countries workers wil now be retren

Adeoti

Will now be retrenched as a result of economic recession... That is the little i knw....

Adeoti

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what is the condition of a consumer behaviour in the equilibrium under the theory of consumer behaviour

a state is said to be equilibrium when there is no tendency of movement.

Nibedita

Pls @Nibedita am confused

Prince

The state of balance achieved by an end user of products that refers to the amount of goods and services they can purchase given their present level of income and the current level of prices. Consumer equilibrium allows a consumer to obtain the most satisfaction possible from their income.

what are the two conditions for aconsumer to be in the equilibrium under the theory of consumer behaviour in

Sahr

Economic equilibrium is a condition or state in which economic forces are balanced. In effect, economic variables remain unchanged from their equilibrium values in the absence of external influences.
Economic equilibrium may also be defined as the point at which supply equals demand for a product,

vinay

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Hello there,
let's make a time to chat about econimics and its issues.

rare, limited. economic agents eg You dube, the govt & the business entities wants to maximise their utility/satisfaction but because limited resource or scarcity of such resources they are unable to satisfy their needs.

ian

thank u Sir , l understand what you are saying now

Thembelani

limited resources; you wanna take the most benefits from the minimum resource.

DA

if u ar a fresher, eco has to 2 fundamental parts "micro & macro". micro(small) this is were the economc agents ar discussd, economc systms, dmand & supply, typs of market systms etc and the macro (big) part the elucidates the functns of central bank, typs of employmnt, functns of money & int trade.

ian

there is an old adage that says "a picture is worth a thousand words" economics is full of graphing so it requires on the side of the student to master the art of keeping information in form graphs.

ian

oky Sir

Thembelani

scarcity becomes the fundamental problem of economics because of limited resources, when we take an individual, he or she has many wants, thus unlimited wants but can never satisfy all but only few.

Rhaiymornd

now when we take a firm, a firm maybe willing to produce two or more product into the market but due to limited resources they only produce one. the same way if we take the government, he or she maybe willing to bring development either through infrastructures,

Rhaiymornd

that is when consumer decision making rule comes in

Olusegun

choice arises as a result of scarcity of resources

Olusegun

so if we look through, the individual, firm and government, their wants are unlimited but due limited resources, all of their wants cannot be satisfy. therefore scarcity can be term as limited in supply of resources.
scarcity is not lack of resources but insufficient resources

Rhaiymornd

there is a marriage with the following; scarcity, factors of production, opportunity cost curve (occ) or (ppc, ppf, tc) production possibility curve
productn possibility frontier
transformation curve. The OCC, PPC, PPF & TC explains the decisions made by householders, firms & the govt.

ian

opportunity cost also arises as a result of firm willing to produce a particular commodity but resources use in satisfying or producing such output is limited

Olusegun

wat ar those decisions? the most important is WHY nations economise tht is if they hav abundancy of factors of productn eg land, labour & entreprise? now since all of us have unlimited needs against few resourcs PPC, PPF, TC, OCC walks in to make wise allocatn of resources.

ian

how do those decisions made? eg by economic agents;
a. Household (You) - if u have R10 & wish to buy a book & a pen & realise that both commodities seĺl at the same price which of the two (2) can u buy (necesity) and which one can u forgo (not all tht important).

ian

b. firms - they allocat mo resourcs to all thoz commoditz tht they think will yield mo profit.
c. Govt - if the govt SA was to come in yo area which 1 would u think they can consider first tht can benefit the majority & the minority. So instead of building football stadium they construct a hospital.

ian

if the SA govt had enough resources they would have built both the stadium and the hospital but because of scarce in terms of resources they had to forgo the construction the stadium to build a hospital which is necessary for the majority to benefit.

ian

Opportunity cost well broken down..

Andres

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opportunity cost means the lose of other alternatives when the alternative is chosen

is the benefits that you loose by not selecting a certain alternative.

EDWINY

individual wants maybe unlimited, but means to satisfy them are limited there one has to forgo some alternative in order to acquire other alternative and it must according priority, that is when scale of preference set in for individuals to make choice

Rhaiymornd

hello everyone

Aliyu

Next best alternative forgiven

Shoaib

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demand is the amount of goods and services that consumer is willing and able to purchase at a particular prices over given period of time